Japan's Mitsui & Co. enters top bid for AWE takeover

Feb. 26, 2018

Japan's Mitsui & Co. Ltd. has swept into a strong takeover position in the bidding war for Sydney-based AWE Ltd. with its $602-million (Aus.) all-cash takeover offer.

Mitsui threw its hat into the ring with a 95¢/share offer for AWE that eclipsed the previous 83¢/share bid from Mineral Resources Ltd. (MinRes), Perth.

AWE's board has been quick to withdraw from the MinRes deal and come out in support of Mitsui's offer. MinRes has been unable to match the Mitsui proposal within the 3-day opportunity it had to do so and AWE's board has unanimously recommended the Japanese overture in the absence of a superior offer.

An earlier, third bid of 73¢/share from China Energy Reserve & Chemical Group (CERGC) also has been formally rejected by AWE's board (OGJ Online, Dec. 11, 2017).

AWE has appointed Grant Thornton to provide an independent report to ascertain whether the Mitsui bid is fair and reasonable. Meanwhile, AWE has entered into a bid implementation deed with Mitsui.

Mitsui's offer to acquire all of AWE's shares is a 74.3% premium to AWE's closing share price of 54.5¢/share on Nov. 29, which was the day prior to disclosure of the first proposal from CERCG to acquire the company. This first offer last year put AWE in play.

The breaking of the accord with MinRes does trigger a $5.3-million break fee payable to MinRes, while a break fee of $6 million now applies to the Mitsui deal should AWE directors change their recommendation and favor a higher offer.

While analysts do not rule out another bid from MinRes, they think it unlikely. There is the possibility of other bids from elsewhere, but time favors the Mitsui bid because the implementation deed will run for a shorter time than the MinRes-style scheme of arrangement. The Mitsui offer period is expected to end in the third week of March.

The Mitsui deal has already obtained Foreign Investment Review Board approval and has been lodged with the Australian Securities & Investments Commission.

Mitsui already has a substantial oil and gas business in Australia, although it has been in a non-operating role. The company has said that the key driver for the bid is to gain access to Waitsia natural gas field onshore Perth basin in Western Australia in which AWE has 50% interest and operatorship.